Around four years ago, I began to hear reports about bank accounts being frozen for no reason.
People were saying that they couldn’t get their hands on their money and the banks were refusing to say why.
At first, the problem seemed to be with some of the new online digital banks.
However, as cases began to spiral out of control, some of the main high street banks began doing the same thing.
Huge numbers of people have reported problems since with many people still locked out of their accounts.
In recent weeks, Mirror readers have been reporting an increase in account freezing again. So what’s going on?
Money laundering, the law and what the computer says
When an account is frozen, most banks won’t tell you why, leaving you in a difficult position.
You can’t get clear answers about what’s caused the problem and without them you can’t correct mistakes.
This situation arises when the banks suspect fraud or money laundering on an account.
Has your bank account been frozen or closed unexpectedly? Let us know: mirror.money.saving@mirror.co.uk
With money laundering, they are not allowed to tell you if an investigation is under way. But realistically, this is not that common.
What seems to have happened is some banks have been overly cautious and have extended these rules to any "suspicious transactions" that are out of your usual account profile.
This could be a random £500 payment from a family member, for example.
There’s no reason why your bank can’t talk to you about a suspicious transaction, but many are interpreting the rules too rigorously.
No one knows definitively why this has become a problem.
However, the evidence suggests that it’s because banks have automated their money laundering and anti-fraud checks.
Most banks already use automation to spot unusual patterns in bank accounts, but it would seem the computer’s new algorithms have become over sensitive in some cases.
I’ve seen people whose accounts have been frozen after a £300 payment which is easily explainable. So it’s clear that things have gone badly awry.
What can you do if it happens to you?
In the past, sorting out an account freeze issue was relatively easy.
You called the bank, they asked you a few questions about the suspicious transaction and if you could answer or explain they would unfreeze the account.
In fact, the vast majority of these complaints were resolved on the phone, on the day.
However, readers are reporting that banks are simply refusing to talk to them when they call.
Here are a few practical tips that you can try if they aren’t playing ball
- If you still have access to online banking, go through your recent transactions and highlight anything that might be out of the ordinary. Make sure you note down where they come from.
- When you call the bank, ask to speak to their fraud team as they are more likely to have the power to take a pragmatic look at your account. Ask if a certain transaction has caused the problem and explain why.
- If the bank refuses to help then make a formal complaint there and then. Failing that take the case to the Financial Ombudsman.
- Set up a new bank account as soon as you can – you should still be able to do this despite the account freeze. Ask the new bank if you need to set up your regular payments again and make sure your cash is paid into the new account.
- If you are on benefits, then ask if they can recall the money in the frozen account and pay it to a new one. You have a legal right to specify where your benefit money goes and in theory, the bank should not prevent you from accessing it
The most important thing is to not panic and make alternative arrangements for your money – you don’t lose the right to make a complaint.
What about if your account has been closed?
Trying to find out why your account has been closed is almost impossible with some banks. But usually the reasons are:
- Suspicious transactions outside of the normal range in the account.
- Lack of use
- Suspected fraud
- Personality clashes (you’ve been rude to staff repeatedly)
- Support for unlawful activities, terrorism, etc.
- Reputational risk
And allegedly:
- You’re not making them any money
- Automated systems making mistakes
- People making mistakes
While the bank can’t be forced to tell you why it’s closed your account, but you can complain about it if you think it’s made a mistake.
This matter because in the process of making the complaint or going to the Financial Ombudsman, you might get the answer you need.
Your bank won’t say to you that it thinks you’re up to something dodgy.
However, put the question to them: Has my account be closed because of these transactions, because I can explain them?
Explain these transactions, there’s a chance they’ll either acknowledge the problem of say no, in which case you can strike that one off the list.
You can also ask to speak to the bank's actual fraud investigation team, who are more likely to take a realistic approach to things on the system that have triggered your account being frozen or closed.
Your bank won’t say to you that it thinks you’re up to something dodgy, but there’s a chance they’ll either acknowledge the problem of say no, in which case you can strike that one off the list.
Mistakes do happen and sometimes you might be confused with someone with a similar name who is on a list of fraudsters somewhere.
Or someone might have just typed in the wrong thing into the computer.
Again, when taking your complaint further, explain that you’re concerned about incorrect information that may be on file that has the potential to affect your credit or reputation and ask for it to be corrected.
Always take the complaint to the final stage of the bank’s complaints process and get a written response.
The higher up you go, the more likely someone will take a pragmatic look at the situation.
The Ombudsman can’t reveal to you what it’s been told by the bank confidentially, but it can check that information to see if it seems fair or accurate.
For the last 20 years I’ve dealt with people deeply, deeply distressed as a result of an account closure.
That paranoia of never knowing if there is a "black mark" against your name can have a lasting impact on you and your relationship with all other financial services.
Yet in the vast majority of cases, the reason for the closure was a mistake or something really minor.
And there is no reason why people can’t be told this.
Even if the answer is just: we don’t want you anymore because you don’t make us any money.
It’s high time this veil of secrecy was swept away once and for all – and built into the regulations if need be.